Lance R. Pomerantz
Attorney at Law

Land     Title     Law

“Constructive Notice”  The  Newsletter

Excerpted from the April 2, 2018 mailing of "Constructive Notice":

SOL On A Subrogation Claim

Claims counsel frequently carry heavy caseloads and thoroughly evaluate every aspect of each to verify the insured gets what they deserve. If liability is established, the claim is paid and the insurer is subrogated to the rights of the insured to pursue the wrongdoer (technically known as “the Bad Guy”) whose conduct gave rise to the claim.

Sometimes overlooked in the claim determination phase (especially a lengthy one) is the reality that the insurer is not only subrogated to the insured’s rights, but also subject to any defenses the Bad Guy might have against the insured. Such was the case of an insurer whose claims as subrogee ran into the statute of limitations in Commonwealth Land Title Insurance Company v. KCI Technologies, Inc., et al., No. 1:17-cv-01070 (U. S. D. C. D.C., March 13, 2018).

A survey done in 2006 did not identify any encroachment on the land. Commonwealth issued the title insurance policy in 2007, without excepting any encroachment. In 2012, Insured hired a different surveyor to survey the insured property, and that survey showed an encroachment not shown on the earlier one. Yet another survey, done at Insured’s behest in 2013, not only showed the encroachment, but showed it as more extensive than did the 2012 survey. A February 2014 survey done by the original (2006) surveyor at Insured’s behest did not show the encroachment.

In March 2014 (that’s right, a month after the last survey), the architectural and construction company hired by Insured reported that the encroachment was actually 3 times larger than was shown on the 2012 survey. As a result of additional costs necessitated by the removal of the encroachment, Insured tendered its claims in late 2014 and Commonwealth paid over $1,000,000 under the 2007 policy. In 2017, Commonwealth brought suit against both surveyors, who raised the three-year statute of limitations.

Commonwealth admitted in its pleadings each “alleged injury occurred when the surveying entity tendered survey reports that failed to notice a 12 inch encroachment on the property.” The court determined the statute of limitations for an action on the 2006 survey began to run against the insured no later than 2012. Since the title insurance claim was paid under the 2007 policy, the defective 2006 survey was the basis for liability. Even if a separate cause of action had arisen for each survey, Commonwealth’s action was barred against all of them.


The Court determined the discovery rule is inapplicable to a case of this type. Even if it were, the “latent defect” in the 2006 survey should have been revealed by the 2012 survey, barring the claim brought in 2017. The opinion doesn’t say when (or even, if) Insured notified Insurer of the later surveys before tendering its claim. Obviously, a tender made after the statute of limitations had run may well have been denied as untimely.